UNIT 1: INTRODUCTION

 Management: concepts, meaning, essence,

levels and functions.
 Types of managers.
 Managerial roles and skills.
 Becoming a manager: role of education,
experience and situation.
 Business environment and society-external
environment, corporate social responsibility,
ethics, corporate governance and ethical
standards.
 Management is the process of getting
things done through others with the help
of some basic activities like planning,
organizing, directing, coordinating and
controlling.

 “Management is a set of activities directed

at an organization’s resources with the
aim of achieving organizational goal in an
efficient and effective manner.”-Ricky
W.Griffin
• Efficient:
“Doing things right”
Using resources wisely
& in a cost-effective way.

• Effective:
“Doing the right things”
Making the right decisions & successfully
implementing them.
 Human resources
 Financial resources
 Physical resources
 Information
 planning:- setting organization’s goals
 Implementation:
◦ organizing,
◦ directing,
◦ Coordinating
 leading
 Controlling:- control, assessment and
feedback
 Group Activity
 Goal-Oriented
 System of authority and responsibility
 Adopting situational approach
 Coping with environment
 Identifiable Functions in the Management
Process

1-9
 Manager
Someone who coordinates and
overseas the work of other people so that
organizational goals can be accomplished

 Classification of Managers:
Top Managers
Middle Managers
First-Line Managers
 Top Level

Highest Level, Brain of the organization

Responsible for overall management
Decision maker, set goal, objectives
Chairman, President, Executives Director, CEO
 Middle Level

Functional heads of different departments

Responsible for preparing and implementing
departmental plans
Mediator between top and lower level
HR, Finance, Procurement Managers
 Lower Level

Operating/front-line/supervisory
Day to day plans
Supervise, lead, control operating staff
Officers, Supervisors
 Inter-personal Role
Figurehead, leader, liaison

 Informational Role
Monitor, dissemination, spokesperson

 Decisional Role
Entrepreneur, disturbance handler, resource
allocation, negotiator
1) Interpersonal Role :
Manager performs interpersonal role in order to coordinate
and interact with the organizational members.

o Figurehead Role: It involves ceremonial work such as

greeting and receiving visitors, chairing board meeting,
attaining ribbon cut ceremony

o Leader Role: The manager is asked to serve as a leader. He

or she is responsible for hiring, training, and motivating
employees. Thus, encourages employees to improve
productivity.

o Liaison Role : It involves maintaining relation internally with

different unites and externally with the society for building the
image, gathering resources.
Monitor
• Under this the manager keep close eye over the activities
taking place in and around the places.
• The manager seek for information that may be of value.

Disseminator role
• The manager is also a disseminator of information,
transferring relevant information to the subordinates and keep
them informed of what is going on around the organization
and the precautions to be taken.

Spokesperson role:
• The spokesperson relay the information to the people outside
the unit or outside the organization
 Entrepreneurship role: It is concerned with planning and
initiating change within the organization.

 Disturbance handler role: It is related with maintaining

friendly working environment and organizational stability by
resolving problems of disagreement and conflict.

 Resource allocator role: It deals with the managerial function of

allocating resources (money, people, time, equipment) to
different unit and subordinate.

 Negotiator role: It involves representing as well as protecting

organization’s interest in dealing with insiders and outsiders to
add value to work.
 Human Skills
 Communication skills
 Technical Skills
 Conceptual Skills
 Decision making skills
 Interpersonal Skills
 Time management skills
What is Business Environment?

 The sum of all forces surrounding and influencing

the life and development of an organization.

 Business environment is the aggregate of all

conditions, events and influences that surrounds
and effects the business.-Keith Davis (1986)

 Environment refers to institution or forces that

effect the organization performance.- Robbins and
Mary Cutler
 Those factors and forces outside the organization that affect
the organization’s performance.

 The external environment is known as uncontrollable factors

because such factors are largely beyond the control of the
organization.

 Provides opportunity and threats to the organization

 It includes:
A. General Environment
B. Task Environment
 It is composed of set of forces that are outside the
organizations’ operating system. They are:

1. The Economic Dimension

2. The technological Dimension
3. The Socio-cultural Dimension
4. The Political-Legal Dimension
5. The International Dimension
1. Economic Environment

◦ The overall health and vitality of the economic system in

which the organization operates

◦ Fiscal policy, monetary policy, industrial policy, economic

growth, inflation, interest rates, low unemployment etc.
e.g. higher wages to attract new employees

2. Technological Environment

◦ The methods available for converting resources into

products or services
◦ Improved information technology
◦ Fewer employees, time savings
3. Socio-cultural Environment

– The customs, values, and demographic characteristics of

the society in which the organization functions
– Determine the products, services & standards of conduct
that the society is likely to value
– tastes changes overtime
– preferences for color, style, taste and so forth
– Depends on religion, education, class system, etc

4. Political-Legal Environment
– Government regulation of business and the relationship
between business and government
– Legal system define:
what an organization can or cannot do?
– Constitutions, political parties, government
5. International Environment
◦ The extent to which an organization is involved in or affected
by business in other countries

◦ Firms dealing with import-export business are most affected by

the changes taking places in international market

◦ Multinational firms e.g. Sony, Nestle, Hyundai, etc

◦ E.g. McDonald’s operates restaurants in 115 countries and

derives about two-thirds of its total sales from outside the
United States.
◦ It is made up stakeholders who affect an organization's activities
from outside the organization.

◦ The task environment is also called the competitive or operating

environment.

◦ The task environment differs from the general environment in that

it can be influenced or controlled to some extent by an
organization.

◦ It includes:
 Competitors
 Customers
 Suppliers
 Strategic Partners
 Regulators
1. Competitors
– Competitions between substitute products
– E.g. Nike and Adidas
– Organizations may also compete for different kinds of
resources
2. Customers
– Whoever pays money to acquire an organization’s
products or services
– Customer satisfaction-huge impact-organization’s
success
3. Suppliers or Distributors
– provide necessary resources or a network to market or
other organizations
– Influence the course of action by price policies, discounts
for competitors, or a contract that binds them to one
singular competitor
4. Strategic partners:
 An organization working together with one or more other
organizations in a joint venture or similar arrangement
 Strategic partnerships help companies get from other
companies the expertise they lack.
 Helps to spread risk and open new market opportunities.

5. Regulators:
 A unit that has the potential to control, legislate, or
otherwise influence the organization’s policies and
practices
 Regulatory agencies: An agency created by the government
to regulate business activities
 Interest group: A group organized by its members to
attempt to influence business
 The conditions and forces within an organizations

 Internal environment offers strength or weakness

to the organization.

 Internal environment consists of:

◦ Owners
◦ Board of Directors
◦ Employees
◦ Physical Work Environment
◦ The Organization’s Culture
1. Owners:

– People who have a legal property right/Shareholders

– Individual investors, partners who jointly own the business

2. Board of Directors:

– Governing body elected by a corporation’s stockholders and

charged with overseeing the general management of the firm to
ensure that it is being run in a way that best serves the
stockholder’s interests
– Formulation of corporation strategy
– Review importance decisions

3. Employees:

– Source of information/feedback, cooperation required

– Permanent or temporary employees
4. Physical Work Environment

– Facilities to interact with different people on different projects

– Wireless communication equipment to keep in contact

5 The Organization’s Culture

– The set of values, beliefs, behaviors, customs, and attitudes that

helps the members of the organization understand what it
stands for, how it does things, and what it considers important
 Concept of Ethics:
◦ study of people’s rights and duties
◦ the moral rules that people apply in making decisions
◦ Moral principles or beliefs about what is right or wrong

 Decenzo and Robbins: “Ethics commonly refers to a set of

rules or principle that defined right and wrong conducts”

 R. W Griffins:” Ethics is an individual personal belief about

weather a behavior , action or decision is right or wrong.
Managerial ethics are the standard of behavior that guides
individual manager in their behavior.
 Therefore managerial ethics refers to an act that
manager have to practice fair management
processes and respect social values

 It is concerned with truth and justice

 It has variety of aspect: such as expectation of

society, fair competition, advertising, public
relation and social responsibilities.

 It defines what is good and bad with moral duty

and obligations
 Unfair business practices affect customers,
government, competitors, suppliers,
shareholders, etc.

 E.g. false financial statement, use of unfair

means, evading taxes, etc.

 Ethical effects on organizations

◦ How the organization treat its employees
◦ How employees treat the organization
◦ How the organization treats customers,
competitors, stakeholders, unions, etc.
 It enhance the reputation and goodwill of the
company
 It help maintain better relation with
stakeholders
 It ensure less interference by the government
 It improve working environment
 Promotes social responsibility
 Promotes fair competition
 It help to increase market share of the
business
 A set of obligation an organization has to protect
and enhance the societal context in which it
functions

 It is composed of shareholders, consumers,

employees, government and the general
community around the business place

 Social responsibility is:

◦ The obligation to pursue those policies, to make those
decisions, or to follow those lines of action which are
desirable in terms of the objectives and values of the
society.
 Social Obstruction (Obstructionist Stance):
 No Obligation, Hide or Cover up unethical activities,
Don’t care
 Social Obligation (Defensive Stance):
 Just cover the legal requirement and nothing beyond
that
 Social Response (Accommodative Stance):
 Meets ethical and legal requirements; listen to social
requests-however not proactive
 Social Contribution (Proactive Stance):
 Indicate a sincere and strong commitment to
improving the general social welfare in this country;
Charity; Local Sports Clubs; Education
1. Towards Shareholders:
• To ensure safety of capital investment
• To provide fair and regular return
• To provide regular financial information
• To provide opportunities to the shareholders on
decision making
• To maximize value of share holders wealth
2. Towards Customers
• To supply better quality goods in the right time.
• To improve quality continuously
• To provide after sales service
• To avoid unfair trade practice
• To conduct research for betterment of quality
• To provide goods in fair price
• To ensure availability of goods and service
3. Towards Employees
• To provide job security
• To provide fair wages and benefits
• To ensure welfare and benefits for the employees
• To provide favorable working environment
• To ensure employee participation in management.
4. Towards Government
 To follow government rules, laws and regulation
 To pay tax honestly
 To avoid monopolistic practice
 To support solving national problem
 To work for the development of society
 To involve in fair import export trade
5. Towards Public and Community
 To check environmental pollution
 To create employment opportunity to people
 To maximize use of local recourses
 To maintain and respect national culture value and
ethics
 To involve in social welfare program like education,
health, games and sports.
 Emergence of Open Market Economy
 Increasing role of private sectors
 Private investment in infrastructure development
 Emergence of multinational companies
 Growth of service sectors
 Development of information technology
 Emergence of Consumerism
Management
Theories
 Classical Perspective: scientific management,
administrative management and bureaucracy.
 Behavioral Perspective: Hawthorne studies, human
relations movement, and emergence of organizational
behavior.
 Quantitative Perspective: management science and
operations management.
 Integrating perspectives: systems and contingency
perspectives.
 Emerging management issues and challenges.
• Scientific Management Theory

• This theory arose to:

o Increase productivity of employees
o Increase efficiency of management

 F.W.Taylor- known as “father of scientific management”

Frederick W. Taylor (1856-1915)

 Midvale Steel Company

 Bethlehem Steel Company
o Considered each worker as a economic beings
o Implemented Piecework payment system
o “there is one best way of doing every thing”
• The first few years of 18th Century faced the serious
problem of productivity
• Businesses were expanding, capital were available but
labor was in short supply
• The challenge was how to make these available labor
work more efficiently
• Experts begins to focus on ways to improve the
performance of individual workers, which leads to the
development of scientific management
• Earliest advocates of scientific management includes F.W
Taylor, Frank Gilbreth, Lillan Gilbreth, Henery Gantt and
Harrington Emerson
• F.W Taylor Played the dominant role
• Taylor started his first job as foreman at Midvale
Steel Company in Philadelphia
• He observed employees were soldering over there
• He studied and timed each elements of steel workers
job
• Determined what each worker should be producing
• Designed the most efficient way of doing each part of
the over all task
• Implemented the piece work pay system
• After he left Midvale, he started working as consultant for
several companies
• At Simond Rolling Machine Company, he studied and
redesigned the job
• Introduces rest periods to reduce fatigue and implemented
piecework pay system
• Result were higher quality and quantity of output and morale.
• At Bethlehem Steel, Tailor studied the best way of loading and
unloading the rail car and applied his finding with equally
impressive result
• In this due course he developed the basic idea that he called
Scientific management
1. Develop a science for each element of the job to
replace the old rule of thumb
2. Scientifically select employees and them train them
to do the job as described in step 1
3. Supervise employees to make sure they follow the
prescribed methods for performing their jobs
4. Continue to plan the work, but use workers to get
work done
 1 2 3 4
Supervise employees
Develop a science Scientifically select Continue to plan
to make sure they
for each element of employees and then the work, but use
follow the prescribed
the job to replace old train them to do the job workers to get the
methods for performing
rule-of-thumb methods as described in step 1 work done
their jobs
 foundation of modern mgmt theories

 focused to increase productivity and efficiency of the

organization.

 It seeks to minimizes the cost of production which

enables business firms to increase profit.

 It gives them the capability to think in analytical,

conceptual & multidimensional ways.
 It fails to enlist all contingency variables.
 Stable and simple organization
 It ignores human behavior aspects.
 It does not favor group
 Fear of Job Cut
 Undue pressure
 Discarded human aspect
• Frank and Lillian Gilbreths were husband and wife.
• Most interesting contribution of Frank Gilreth was the craft
of brick laying
• Studied the bricklayer at work and developed the most
efficient way of performing the task\
• Specified standard material and technique, positioning of
labor, the brick, and mortar at different level
• He was able to reduce 18 different physical movement to 5
steps
• The productivity increases by 200%
• Lillian Gilbreth helped to shape the industrial psychology,
and focused on personnel management
• She focused on employee welfare, how to increase the
productivity by reducing employees fatigues
• Another contributor of scientific management
• Was an associate of F W Taylor
• He departed from Taylor’s team and started his own
consultancy
• Abandoned the differential peace rate system developed by
Taylor and came with new idea
• Every worker who finished a day’s assigned work load
would earn a bonus
• Moreover the supervisor would earn bonus for each worker
who meet the standard plus an extra bonus if all the workers
reached it
• This increases the supervisor’s motivation to train their
worker to do better job
• Every workers progress were rated publicly and
recorded on individual bar chart
• The bar would be shaded black if worker meet and
standard and with red if they don’t
• Also developed a technique known as Gantt Chart
to improve workers output.
• It is a means of scheduling work and can be
generated for each worker or for a complex project
as a whole.
 Focus on administrative problems of organization

 Effective means of studying and managing

organization effectively

 Designing, creating and maintaining large

organization
 Fayol was the citizen of France
• He was an mining engineer
• Contemporary of FW Taylor and Weber
• Was unknown to the rest of the world until his book “General
and Industrial Management” was translated into English
• He is the pioneer of comprehensive management theory

• Identified elements of management:

Planning
Organizing
Commanding
Coordinating
Controlling
 He believed that these functions accurately reflect
the core of the management process.
• Considered as father of management for
systemizing the management theory
• He advocates that manager are not born and every
body can be manager by acquiring and exercising
knowledge and skills
• Was the first person who recommended
management studies at universities
• With his own experience , he attempted to
systematize the practice of management to provide
guidance and direction to other managers
Fayol’s principles provide modern-day managers with general
guidelines on how a supervisor should organize his/her
department and manage the staff.

1. Division of work
2. Authority and responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of individual interests to the general interest
7. Remuneration of personnel
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability and tenure of personnel
13. Initiative
14. Esprit de corps
 Fayol’s principles are listed below:
 Division of Work
 Managers should divide work among individuals and groups. This
ensures that effort and attention will be focused on special
portions of the work. Output can increase if employees are
specialized. This is because they become increasingly skilled and
efficient in their fields.
 Authority
 Fayol defined authority as “the right to give orders and the power
to exact obedience.” The managers should have the power to give
orders. But they should also remember that with authority comes
responsibility.
 Discipline
 It is essential to maintain discipline. However, the methods for
doing this can vary. Successful company will need the common
effort of workers. You can apply penalties to inspire this common
effort.
 Unity of Command
 It is best if employees have only one direct supervisor.
 Unity of Direction
 Teams, which have the same goal, should work under one
manager’s direction. They should use one plan. This will
guarantee that the action is coordinated properly. Unity of
direction means the entire firm will move in the same
direction.
 Subordination of Individual Interests to the General Interest
 The interests of any one employee should never be given
more importance than the interest of the group. Even the
manager’s interest comes after the group.
 Remuneration
 Fair remuneration should be given to everyone. This ensures
employee satisfaction. Remuneration includes both financial and
non-financial compensation. There are many variables which
should be considered before deciding a worker’s rate of pay.
Some of the variables are:
 Cost of living
 Supply of qualified personnel
 General business conditions
 Success of the business
 Centralization
 Centralization refers to how involved employees are in the
decision-making process. Managers should aim for a suitable
balance. Fayol defined this as “lowering the importance of the
subordinate role.” Decentralization means to increase the
importance. The degree of centralization or decentralization a
firm should adopt depends on the specific organization.
 Scalar Chain
 Employees should know their position in the organization’s
hierarchy. Where they stand in the chain of command is
critical. Managers in hierarchies belong to a chain like
authority scale. Each manager has a certain amount of
authority. The President has the highest authority. The first-
line supervisor has the least authority. It is important for
lower level managers to inform upper-level managers about
their work activities. The existence of a scalar chain is
essential. It is necessary to adhere to it.
 Order
 The workplace should be clean and safe for all employees.
Everything should be in its place. All the people related to a
specific type of work should be treated as equally as possible.
This is good for efficiency and coordination.
 Equity
 Managers must always be fair to staff. They are expected to
maintain discipline when needed and act with kindness when
it seems right.
 Stability of Tenure of Personnel
 Managers must make an effort to reduce employee turnover.
They should give priority to Personnel planning. Recruitment
and Selection Costs are usually related to hiring new workers.
Increased product reject rates also cost a lot. Retaining
productive employees should be a high priority of
management.
 Initiative
 Employees should have the necessary level of freedom they
need to make and conduct plans. Management should
encourage worker initiative. New or extra work activity
undertaken through self-direction is an example.
 Esprit de Corps
 Organizations should always attempt to promote team spirit
and unity. Management should inspire harmony and general
good feelings among the workers.
 Fayol’s 6 Functions of Management
 Fayol also introduced 6 primary functions of management,
which complement the Principles. The functions are:
 Forecasting
 Planning
 Organizing
 Commanding
 Coordinating
 Controlling
 The functions of management have been discussed in details
below:
 FORECASTING
 This involves examining the future and then making a plan of
action.
 PLANNING
 This function is about making plans of actions. It is the most
crucial part of the management. It requires active
participation of the entire organization. Planning should be
coordinated on different levels.
 ORGANISING
 This entails providing capital, personnel and raw materials for
running the business. You will also have to build a structure
to match the work. Organizational structure depends on the
size of the workforce.
 COMMANDING
 This is about optimizing return from all employees. A good
manager would communicate clearly and base his judgments
on regular audits. Clear knowledge of personnel helps creates
unity and loyalty. It reduces incompetence.
 COORDINATING
 This function means to unify and harmonize activities and
efforts. It helps maintain the balance between the activities of
the organization as in sales to production and procurement to
production. Fayol suggested that weekly conferences for
department heads will solve problems.
 CONTROLLING
 This is about monitoring organizational progress towards
goal attainment.
Max Weber theory:
 Bureaucracy:
a formal system of organization and administration designed
to ensure efficiency and effectiveness.

 Bureaucracy is defined as management/administration marked by

hierarchical authority and fixed procedures.

 a system characterized by division of labor, a clearly defined

hierarchy, detailed rules and regulations, and impersonal
relationships.
• the word Bureaucracy developed from French word
bureau which means desk or office
• It is the name of organizational structure used by
sociologist
• A formal system of organization based on clearly
defined hierarchal levels and roles in order to
maintain efficiency and effectiveness.
• A Formal Hierarchical Structure: Each level control
the level below and is controlled by level above
• Management by rule: This allows decision made
at higher level to be executed consistently by
lower level
• An up-focused or in-focused mission: If mission
is described as up focused then the
organization’s is to serve the stockholders, the
board or whatever empowered it.
• if mission is to serve the organization itself, and
those within it, e.g. to produce high profit, to
gain market share, or to produce cash stream,
then the mission is described as in-focus.
• Impersonal: The idea is to treat all employees
equally and customer equally.
• Formal Selection: All the organizational members
are to be selected on the basis of technical
qualifications demonstrated by training,
education or formal examination.
 Division of labor and specialization
 A well-defined hierarchy
 Rules and regulations
 Impersonal relationships between managers
and employees
 Competence
 Records
 Way of structuring organizations in most
effective way

 Identified important management process,

functions and skills

 Proposed most complete system of

organizing and managing work
  Prescribed universal management procedure
 Ignore human element
 Considered stable and simple organization
 Fixed rules and system
• Limitations
• To much emphasis on rules and regulation creating inflexibility
• No importance is given to informal group
• Involves lots of paper work leading to waste of time effort and
money
• Delay in decision making due to lot of formalities
• To much emphasis is given to technical qualification of
employees for their selection and promotion but their
dedication and commitment are not considered.
• Human Relation Theory
• The Hawthorne Studies
• First experiment
• The research was conducted at Hawthorne plant, near
Chicago by Elton Mayo and his associates
• Was a faculty member and associate at Harvard University
• Research was sponsored by General Electric
• Mayo and his associate conducted a series of studies starting
with observing the effect on productivity with changes on
physical environment.
• At first workers were divided into two groups and provided
rooms for each group
• He named one group as experimental group and
increased the lighting in that room
• Another group was named as controlled room and it
was left as it is
• Surprisingly, productivity increased in both the
group.
• Productivity went on increasing even when the
lightening at experimental group was decreased.
• Started decreasing only when the light were
decreased to the level of moonlight.
• Second experiment
• Second experiment involves the introduction of piece
work incentive plan for a group of nine men terminal
bank for telephone exchanges.
• Expectation was men would try to maximize their
money by producing as much as possible
• However, it was found that group itself informally
established an acceptable level of output members
• Workers who overproduced were branded “rate busters’’
• Under producer were leveled “chiselers”
• To be accepted by group workers produced at the
accepted level
• Third experiment
• Another studies included interviewing program which
involves several thousands workers
• The interview led to a conclusion that human behavior is
important at workplace
• In lightning experiment, the result were attributed to the
fact both the group received the special attention and
sympathetic supervision for the first time
• The incentive pay plans fails because wage incentive were
less important to the worker than the social acceptance
• Ultimately this led to the belief that employee satisfaction
is the key for the determinant of performance.
◦ It is concerned with scientific investigation, analysis
& understanding human behavior in organization.

◦ It is the modified, enlarged & extended forms of

classical theory (i.e. scientific management theory,
administrative management theory & bureaucratic
theory).
◦ This theory emphasized on social & psychological
factors at work.

◦ A large number of behavioral scientists have

made notable contributions to the management
theory. Abraham Maslow, Douglas McGregor,
Fredric Herzberg etc. contributed in behavioral
school theory
• also known as quantitative or mathematical
approach
• Uses quantitative model to solve the problem
• Helps in solving planning, production, operation,
inventory and transportation related problem
• Advancement in technology and information
system has made this approach even more
important
• This approach was first used in military
organization during second world war
• During that time England was facing unique
military problem relating planning the operation,
• allocation of resources and developing the war strategy
• To solve this problem British government formed the
team of scientist, mathematician and physicist
• The team was named as operation research team
• Later American also used this same approach for
solving war related problem
• Business organization also borrowed this same strategy
from military organization
• Focus of this approach was on planning, designing and
implementing the strategies and determining how best
the problem can be solved Today to solve many
management related problem management science
techniques are used.
• There are three main branches of management science
• Quantitative approach (used management techniques
such as LP, modeling, quenching theory to help manager
to take right decision)
• Operating Management (this technique is used to utilize
an organizational production system to increase the
efficiency)
• Management Information System (helps to find
information about event occurring within and outside the
organization)
 He proposed two distinct views of human
beings: negative view of people ‘theory X’ &
positive view of people ‘Theory Y’.

 ‘Theory X’ is a set of pessimistic &

traditional assumption about the worker &
‘Theory Y’ is a set of optimistic assumption
about human nature.
 Employees generally dislike work
 Employees avoid responsibility
 They are interested only in security
 Since employees dislike work, they must be
corrected, controlled or threatened with
punishment to achieve desired output.
 They require close direction
 Work is natural activity like play or rest.
 People will become committed to
organizational objectives if they are
rewarded for doing so.
 People will exercise self-direction & self
control if they are committed to objectives.
 The average person can learn to accept &
seek responsibility.
 Many people in the general population have
imagination, ingenuity & creativity
 This theory has identified the role of human
elements in the organizations.

 It has emphasized the role of individual psychology

& group behavior for organizational effectiveness.

 It has focused the self direction of subordinates

through workers' participation in planning &
decision making.

 It has emphasized on non-financial rewards.

 It has considered people as the key players for

organizational productivity.
 This theory has not considered the
situational variables.
 It has neglected the economic dimension of
job satisfaction.
 Human behavior is a complex issue which is
not easy to explain.
 This theory is only a partial view of an
organization. It fails to analyze the wider
aspects of organization.
 A system is an interrelated sets of elements
functioning as a whole
 This approach views organization as an
unified, purposeful system composed of
interrelated parts.
 It says that activities performed in any
segment have impact on any other
segments.
 It helps manager to view organization in
totality.
 `
 Outputs into
Inputs from the Transformation
the environment:
environment: process: technology,
products/services,
material inputs, operating systems,
profits/losses,
human inputs, administrative
employee behaviors,
financial inputs, and systems, and
and information
information inputs control systems
outputs

Feedback
• Goal Oriented: A system theory is a goal directed.
Every system is purposeful.

• Subsystem: The parts of systems are subsystems. All

the subsystems are mutually related to each other. An
organization may have production department,
finance department, human resource department,
marketing department etc which are the subsystem of
an organization.

• Synergy: Synergy means that the whole is greater

than sum of its parts i.e. 2+2=5. It means that the
performance of the whole is dependent on how well
its parts are related.
 Open or closed: A system may be opened or closed. Opens
system interacts with the environment where as closed
system doesn't consider the environmental factor.
 Boundary: Every system has a certain boundary that separates
it from the environment. Open system has flexible boundary
where as closed system has rigid boundary.
 Flow: A system has flow of materials, information, money,
human & other resources. Generally, system has an input,
process & output.
 Feedback: Feedback is an important mechanism that helps a
system to adopt & adjust to the changing & dynamic
environment.
 Entropy: A normal process that leads system to decline.
 Globalization of Business
 Technology
 Changing organization perspective
 Quality and Productivity
 Ethics and Social responsibility
 Innovation and Change
 Workforce diversity
 Meaning. Levels of Planning: Strategic,
Tactical and operational.
 Steps in Planning. Tools for planning.
Planning premises. Pitfalls of planning.
Improving planning.
 Decision Making: meaning, types and
process.
 Decision making conditions – certainty, risk
and uncertainty. Practical exercises on
taking decisions including decision making
using indicators.
 The first component of managing is PLANNING.

 It is the foundation upon which the other management

functions should be build.

 Planning is predetermination of objectives and future

course of action to be taken to achieve defined goals
effectively and efficiently.

 It is the blue print or roadmap of action and operation

 Managers need to understand the environmental

context to develop effective plans to achieve the
predetermined goals.
 Planning is a intellectual process which is concerned
with deciding in advance what to do, when to do, why to
do, how to do and who is to do.

 Planning takes into consideration available and

prospective human and physical resources of the
organization so as to get effective co-ordination,
contribution and perfect adjustment.

 Planning can be defined as:

◦ the process of setting goals, developing strategies, and
outlining tasks and schedules to accomplish the goals.
“By failing to plan, you are planning to fail”
 Integrates Management Functions-lays foundation
 Provides Direction-goals, ways to achieve them, clear idea
 Reduces Uncertainty-prepare for what if scenarios
 Reduces Problems-involves a lot of thinking
 Provides opportunity to analyze alternative courses
of action
 Ensures Effective for Control and Change-provides
basis
 Ensures Better Coordination of Effort-roadmap
 Ensure Better Utilization of Resources-scarce resources
 Organizational goal is a desired state of affair that
indicates where the organization is going.

 Purposes of Goals:
◦ Provides guidance and a unified direction for people in the
organization
◦ Goal-setting practices strongly affect other aspects of
planning
◦ Goals can serve as a source of motivation for employees of
the organization.
◦ Goals provide an effective mechanism for evaluation and
control
Mgmt. Level Goals Time Frame
Top Strategic Long-term: more than 5 years

Middle Tactical Intermediate term: 1-5 years

Lower Operational Short term: within a year

Note: Look at Page no. 209, figure 7.2, an example –Management by Griffin
A. On the basis of Level:
1. Strategic Plan
2. Tactical Plan
3. Operational Plan

1. Strategic Plan:
 Set by top management
 Focus on broad and general issues
 Decision of resource allocation, priorities, action steps to
achieve strategic goal
 President/CEO
2. Tactical Plan:

 Set by middle managers.

 A Plan aimed at achieving tactical goals and develop to
implement parts of a strategic plan.

3. Operational Plan:

 Set by lower level managers.

 Short-term issues
 Carry out tactical plans to achieve operational goals.
 Deal with routine tasks
B. On the basis of Time frame:

◦ Long-Range Plans
 A Plan that covers many years, perhaps even decades;
common long range plans are for five years or more

◦ Intermediate Plans
 A Plan that generally covers from one to five years

◦ Short-Range Plans
 A plan that generally covers a span of one year or less
C. On the basis of Frequency:

1. Standing:
◦ for situation that are likely to recur and become routine
◦ Remain unchanged for longer period of time
◦ guide managers for decision making
◦ e.g. Policy, Procedure, Rule, etc.

2. Single-use plan:
◦ for unusual situation
◦ short-term
◦ remain valid until their purpose is accomplished after
that it is either discarded or revised.
◦ e.g. Program like seminar, speeches; Project, Budget
 Establish goals

 Identify premises

 Identify alternatives

 Test the practicability of alternative

 Select and announce the final plan

1. Forecasting (quantitative techniques)
2. Network Technique (Arrow diagram &
critical path)
3. Flow charts
4. Gantt chart
5. Break-even analysis
 Planning premises means systemic and
logical estimate for the future factors
affecting planning. Environment is dynamic
and future is uncertain. So, the management
makes certain assumption about future.
 For planning to be effective in any business,
certain basic assumption regarding the future
political, economics, social environment, etc.
should be made. Premises guides planning
effectively and it provides a framework and all
plan are made within this framework.
1. Internal premises
2. External premises
3. Tangible premises
4. Intangible premises
5. Controllable premises
6. Uncontrollable premises
7. Constant premises
8. Variable premises
 There are some reasons for plan failure (fail).

1. Management at all levels is not engaged

2. Corporate planning is not integrated
3. Planning is not simple
4. It is based on inadequate information and wrong assumptions
5. Planning is not balanced
6. It doesn’t posses built-in flexibility
7. It is not well monitored, coordinated, implemented, and
controlled.
8. Short-range plans and decisions conflict with long-range plans.
9. A suitable internal climate for planning is not created.
10. Planning fails to consider the external environment and its power
perspective.
 Reinforce the connections.
 Be mission centric.
 Connect staff review and development
process to the planning process.
 Continuously look for, find, and use
appropriate benchmark and best practices.
 Feedback is critical.
 Use planning, assessment and improvement
to help identify what really need to be done.
 Keep the plan moving.
 A vital part of strategic management, involves the
review of external and internal forces that lead to the
specific opportunities and threats facing the
organization, to determine how to pursue the
organization’s long-term goals, using available
resources.

◦ Where are we now? (The Situation),

◦ How did we get there? (Our momentum)
◦ Where are we going? (The Direction)
◦ Where should we be going? (Desired Direction)
◦ How will we get there? (The Strategic Plan)
 Strategic Management:
◦ A comprehensive and ongoing process aimed at
formulating and implementing effective strategies; a way of
approaching business opportunities and challenges

◦ A process that identifies present and future critical issues

for the organization and develops ways to resolves them
within the organization’s resource and external constraints.

The Strategic Management Process

◦ Situational Analysis
◦ Formulation of mission, vision and goals
◦ Strategy formulation
◦ Strategy implementation
◦ Strategy control
 Study Past- Examine Present- Forecast Future

 Two methods of Situational analysis

1. Environmental Scanning
2. SWOT analysis

1. Environmental Scanning
◦ Study, research, analyze and evaluate information
from internal and external environments that have
potential impact on the organization
◦ The method or a technique of acquiring information
and analyzing the trends emerging in the environment
◦ Regular, irregular and continuous
 Identifying potentially relevant
environmental changes

 Monitoring the nature and direction of

change

 Forecasting probability of impact, timing of

potential consequences

 Develop and implement strategic responses

Methods of Environmental Scanning
 Extrapolation method:
◦ Estimation of present situation based on past records and
information. Assumption that same change may happen as
it had happened in the past. E.g. Trend analysis, forecasting
techniques.

 Intuitive Reasoning:
 Estimate future on the basis of logic and idea without
considering the past events. Intellectual guess work.
Assumption of future without any bias.

 Scenario Building:
 Different probable events are estimated and their outcomes
are assumed.
 Constructing time ordered sequence of events that have a
logical cause and effect relationship to one another.
 Cross Impact Matrix:
 Two conflicting trends are studied to find out their
impact on each other

 Morphological Analysis:
 All possible alternatives to achieve organizational goals
are studied and evaluated, especially for forecasting the
impact of technological changes

 Survey Method:
 Opinions are collected from customers, suppliers,
lenders, competitors etc. to forecast the future
 Delphi Technique
 It is one of the popular technique of environmental
scanning in which manager can collect opinions of the
various expert related to the concerned subject matters
that helps to estimate the future. It is the systematic
solicitation of expert opinion in varying stages using
feedback to develop new forecast.

 Brainstorming:
 Views, ideas, experience are shared and conclusion
about future assumptions are made through mutual
consent
2. SWOT ANALYSIS:

 STRENGTHS:
◦ Resource, skill or other advantages related to
competitors
◦ Internal quality
◦ Eg: public image, experience, financial resource,
human resource, etc.

 WEAKNESSES:
◦ Limitation or deficiency in resource, skills, capabilities
◦ Lack of facilities, resources, management capabilities,
etc.
 OPPORTUNITES:
◦ Major favorable situation in the organization’s
environment
◦ E.g. new market reduction in competition, higher
economic growth

 THREATS:

◦ Favorable situation in the organization’s environment

◦ Entry of new competitor, government regulation,
major changes in technology, etc.
 The act of choosing one alternative among a
set of alternatives to produce a desired result.
 It represents the course of action of the
manager from among various alternatives.
 It is essential to run organizational
performance smoothly and to gain defined
objectives
 Thus management has to solve these
problems in best possible way by
considering organizational interest and
objectives.
 Elements of effective decision making:
◦ Information and decision rules
◦ Short-term and long term impact awareness
◦ Identification of decision maker/decision making
body
◦ Communication of decision
◦ Well timed decision
 The Decision-Making Process
◦ Identifying a problem and decision criteria and
allocating weights to the criteria.
◦ Developing, analyzing, and selecting an alternative
that can resolve the problem.
◦ Implementing the selected alternative.
◦ Evaluating the decision’s effectiveness.
1. Types by frequency
◦ Programmed
◦ Non-programmed

1. Types by nature
◦ Operating
◦ Administrative
◦ Strategic
 Programmed:
◦ Structured, repetitive, routine
◦ Recurs with some frequency, day-to-day
◦ Automatic process
◦ Decision making rules and procedures are clearly
established and sources of information defined
◦ Basic operating systems and procedure, and
standard organizational transactions
◦ Mostly dealt by lower level managers
◦ Quick, minimum energy and resources required
 Non-Programmed:

◦ Relatively unstructured, unique

◦ Occurs much less often, exceptional problems
◦ Cannot be automated
◦ Rules and procedures not clearly established and
information source not defined-so there is lack of
information
◦ Introducing a new product line; opening a new
branch; introducing new policy
◦ Specially dealt by top level managers
◦ Lot of time, energy and resources required
 Operating decisions:
◦ day-to-day decisions
◦ Aimed at maximizing efficiency and profitability
◦ Internal organizational issues
◦ E.g. production schedule, sales and distributive schedule

 Strategic decisions:
◦ Special situation decisions
◦ Product diversification
◦ Investment and expansion
◦ External issues

 Administrative decisions:
◦ Linking functions between operating and strategic
◦ Aimed at structuring the organization’s resources for
optimum performance
◦ Mostly middle level are involved in these kind of decisions
◦ Deal with issues like: rules, procedures, information flows,
reward system, etc.
 Autocratic:
◦ Style I: makes decision himself/herself using own
information only

◦ Style II: makes own decision, collect information from

subordinates, may or may not share problem

 Consultative:
◦ Style III: share the problems with the subordinates
individually without bringing them together, collect their
ideas and suggestions and make decisions accordingly

◦ Style IV: share the problems with the subordinates as a

group, obtaining their ideas and suggestions, then he or
she makes the decision
 Group process:
◦ Style V: manager share the problems with their
subordinates as a group
Manager creates alternatives along with the subordinates
Try to influence group
 The decision
maker faces
conditions of...

Certainty Risk Uncertainty

Level of ambiguity and chances of making a bad decision

Lower Moderate Higher

Decisions making condition can be categorized into
three categories:
 Conditions of certainty:
◦ Manager has all the information
◦ Can predict the outcomes of the action
◦ Accurate decision can be made

 Conditions of risk:
◦ Difficult to predict the outcomes with certainty
◦ Although manager has information, knows about the
alternatives and their outcomes of different alternatives can
be estimated, the element of risk is always involved in such
decision
 Conditions of uncertainty
◦ Managers do not have enough information
◦ Cannot predict the future
◦ Risk is high
◦ Need to use their intuition, judgment, and
experience in making decisions under the
conditions of uncertainty
 Decision making is tricky business, especially
when it comes to large groups.
 There are several instances in professional as
well as personal life when decision-making
requires opinions and inputs from more than
one or two people.
 This is where group decisions come into the
picture.
 Group decision-making is a complex process,
which can be achieved by several methods.
Advantages
1. More information and knowledge
are available.
2. More alternatives are likely to be
generated.
3. More acceptance of the final
decision is likely.
4. Enhanced communication of the
decision may result.
5. Better decisions generally
emerge.
Disadvantages
1. The process takes longer than indi-
vidual decision making, so it is cost-
lier.
2. Compromise decisions resulting from
indecisiveness may emerge.
3. One person may dominate the group.
4. Groupthink may occur.
 Interacting groups and teams
◦ Method of Idea generation to solve problems
◦ Members openly discuss, argue about, and agree on the
best alternative

 Delphi group:
◦ a form of group decision making in which a group is used
to achieve a consensus of expert opinion

 Nominal group:
◦ A structured technique used to generate creative and
innovative alternatives or idea
 Firstly, Individuals work separately
 Secondly, they work as an interacting group to evaluate and
choose the alternatives
1. Non-quantitative techniques:
◦ Factual information:

 Information is collected to define the problem, identify

alternatives and evaluating the outcomes of these
alternatives
 No emotions and social pressure
 Desired information may not be available all the time
 Time consuming and costlier
◦ Intuition and experience
 Decision makers use their feelings, perception, previous
experiences, etc.
 Urgent decision requires this technique
 Personal bias may occur

◦ Expert opinion:
 Use the opinion of experts people
 Called Delphi technique
2. Quantitative techniques:
◦ Probabilities and pay-offs:
 Measure of the chance
 Derived mathematically from reliable historical data
 Pay-offs are calculated of each alternatives

◦ Linear programming:
 Used to evaluate the results from several alternative
course of action
 Used to find out the exact solution that will minimize
costs or maximize gains
 Can be used for a product-mix problem, in which
company wants to produce the maximum profit from a
set of raw materials that can be combined in a number
of different ways to specify finished-product
specification.
◦ Queuing theory:
 Waiting-line theory
 Manage waiting lines
 Tries to balance costs and customer waiting line

◦ Simulation:
 Generate additional information about the problem
 To determine the effects of decisions
 Reduce the risk and expense of decision making by
using hypothetical or historical data
 E.g. inventory simulation

◦ Game theory:
 Plays a game with competitors and customers
 is the study of people making independent choices
 Formulation of strategy against the competition
 Meaning, process and principles of organizing.
 Organization Architecture: vertical differentiation –
tall versus flat hierarchies, horizontal differentiation
– functional structure, multidivisional structure,
geographic structure, and matrix structure.
 Responsibility: establishing task and reporting
relationships, creating accountability.
 Authority: line authority and staff authority.
 Delegation of authority.
 Centralization, Decentralization and Devolution:
meaning, reasons, advantages and disadvantages.
Emerging issues in organization design.
 Staffing: concept and importance.
Organization Design is an overall set of
structural elements and the relationships
among those elements used to manage the
total organization.
We must note two point:
1. Organization are design and not left intact. It
keep on changing from time to time.
2. Organization for larger organization is
extremely complex.
Organizing is a process of arranging and allocating
work, authority and resources among an
organization’s members so that they can achieve
organizational goals.
-Stoner, Freeman and Gilbert.
 It involves the assignment of function and the tasks
to group and to individual employee. It includes
delegation of authority to subordinate managers
and operating employee so that they can properly
carry out their duties.

 It establish pattern of interrelationship observed by

all members of the organization.

 Structuring the work system.

Division of Work
Coordination Departmentation

Allocation of Hierarchy
resources
◦ Division of work: Dividing total workload of
organization into tasks & sub- task.
◦ Departmentation: Dividing task which are similar in
nature.
◦ Hierarchy: Establishing reporting relationships between
jobs.
◦ Coordination: Coordinating activities among jobs units
and other activities.
◦ Allocation of resources: Materials & equipments need
to be to allocated at the right place & time to produce
goods & services
• Divides work to be done into specific jobs and
departments.
• Assigns tasks and responsibilities associated with
individual jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups,
and departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
 Clarity About Objective
 Division of Works
 Unity of Command
 Scalar Chain
 Span Of Control
 Departmentation
 Decentralization
 Separation of line and staff functions
 Authority and Responsibility
 Simplicity
 Flexibility
 Identify organizational goals and work activities.

 Classify and group the necessary work activities.

 Establish relationships.

 Delegate authority.

 Provide for coordination and control.

Classical Approach

Behavioral Approach

System and Contingency

Approach
Classical Approach:
 F.W Taylor
 Max Weber
 Henry Fayol

Behavioral Approach:
 McGregor’s theory

Systems and Contingency Approaches:

 The determination of an individual’s work-related
responsibilities
 The starting point of job design is determining the
level of specialization.

 Job Specialization:
◦ the degree to which the overall task of the
organization is broken down and dividend into
smaller component parts.
◦ Evolved from the concept of division of labor
Advantages:
1. Worker performing small, simple task will become very
proficient.
2. Transfer time between task decreases
3. The more narrowly defines the job is the easier it is to
develop specialized equipment to assist that jobs.
4. When an employee who perform a highly specialized task is
absent or reigns the manager can train other in a relatively
low cost.

Disadvantages:
1. The worker who perform highly specialized may become
bored and dissatisfied
2. It may increases absenteeism, the quality of work may
suffers.
3. It does not offer challenges and stimulation
1. Job Rotation: It involves systematic moving
employee from one job to another.
2. Job Enlargement: It involves giving employee
more tasks to perform.
3. Job Enrichment: It involves increases both
the number of task and the control the
worker has on the job.
4. Job characteristic model: It suggest that job
should be diagnosed and improved along
five core dimension taking into account both
the work system and employee preference.
 The process of grouping jobs according to
some logical arrangement

Common Bases for Departmentalization:

 Functional Departmentalization
 Product Departmentalization
 Customer Departmentalization
 Location Departmentalization
 A function is a group of people, working together,
who possesses similar skills or use the same kind
of knowledge, tools, or techniques to perform their
jobs,

 The employee who perform similar kinds of work

are grouped together into one functional unit
called department.

 It is one of the popular form of organization

structure,

 DEPARTMENT on the basis of marketing, finance,

accounting, harm, etc
It involves grouping and arranging activities around
product or products groups. The advantages of this
type of Departmentalization is:

 It facilitate interaction and communication among

employee who produce the same product of service.
 People have full time commitment to a particular
product.
 IT reduces coordination problem
 It also increases and promotes accountabilities and
performance
The disadvantages :

 IT increases duplication of recourses

 It will be difficult to coordinate and monitor
 Administrative cost rise .
 Under utilization of plant capacity
 Ignorance of he overall organization
objective.
 Possibilities of conflict.
When the organization deals with different types of
customer this type of department is suitable. Such
Departmentalization is created to serve special
customer effectively.

Advantages:
1. It is best for organization with various type of
customer.
2. Manager can concentrate on identified and
potential customer.
3. It provide benefit of specialization.
4. Quick adaptation of environmental change
 Disadvantages:

1. Under utilization of facilities

2. Duplication of activities
3. Difficulties in coordination
4. Overemphasis on customer may lead to
wastages of recourses.
5. Possibilities of conflict.
 In this type of Departmentalization activities are
classified on the basis of territory, geographic
location. It is appropriate when the organization
operational activities is spread over a wide
geographic areas

 Advantages:
1. It helps to maintain regional activities effective.
2. It facilitate expansion of organization
3. It helps adjustment in the environment quickly
4. It will facilitate catering customer on the basis of
their needs, interest and taste
 Disadvantages

1. Problem if integration of various regional

department
2. Possibilities of duplication of facilities
3. Difficulties in maintaining control and
coordination.
4. It increases cost.
5. Lack of efficient and skilled employee for all
regions.
 Functional (U-Form) Design
 Conglomerate (H-Form) Design
 Divisional (M-Form) Design
 Matrix Design
 Hybrid Design
Functional (U-Form) Design:
 an arrangement based on the functional approach to
departmentalization
 Unitary form
 Members and units in the organization are grouped into
functional departments such as marketing and production

Conglomerate (H-Form) Design:

 Used by an organization made up of a set of unrelated
businesses
 Holding form
 Based on the product form of departmentalization
Divisional or M-form (Multidivisional) Design:

◦ An organizational arrangement based on multiple

businesses in related areas operating within a
larger organizational framework; following a
strategy of related diversification.

◦ Activities are decentralized down to the divisional

level; others are centralized at the corporate level.

◦ The largest advantages of the M-form design are

the opportunities for coordination and sharing of
resources.
Matrix Design:

◦ An organizational arrangement based on two

overlapping bases of departmentalization (e.g.,
functional departments and product categories).
◦ A set of product groups or temporary departments
are superimposed across the functional
departments.
Hybrid Design:

◦ An organizational arrangement based on two or more

common forms of organization design.

◦ An organization may have a mixture of related divisions

and a single unrelated division.

◦ Most organizations use a modified form of organization

design that permits them to have sufficient flexibility to
make adjustments for strategic purposes.
 Based on the assumption that the optimal design for any
given organization depends on a set of relevant situational
factors
 Four basic situational factors:
◦ Technology
◦ Environment
◦ Size
◦ Organizational life cycle

Technology:
◦ Conversion processes used to transform inputs into
outputs
◦ As technology became more complex, the number of levels
of management increased
Environment:
 Organization’s environment can affect how it should be
designed

 Mechanistic organization:
◦ Found in stable environments
◦ Free from uncertainty
◦ Organizations structured their activities in rather predictable ways by
means of rules, specialized jobs and centralized authority

 Organic organization:
◦ Found in unstable and unpredictable environments
◦ Very flexible and informal model of organization design, most often found
in unstable and unpredictable environments
Size:
 total number of full-time or full time-equivalent employees
 Characterized by higher levels of job specialization, more
standard operating procedures, more rules, more regulations
and a greater degree of decentralization

Organizational Life Cycle:

 Progression through which organizations evolve as they grow
and mature
◦ Birth: first stage;
◦ youth: growth and expansion of organizational resources;
◦ midlife: period of gradual growth evolving eventually into stability;
◦ maturity: period of stability
 Informal groups may evolve according to the needs and
interests of the members.
 It is the undocumented and officially unrecognized
relationship between members of an organization that
inevitably emerge out of the personal and group needs of
employees.
 Herbert A. Simon has described this as “ the interpersonal
relationships in the organization that affect decisions within it
but either are omitted from the formal scheme or are not
consistent with it.”
 One of the first scholars to recognize the importance of
informal structure was Chester Bernard who noted that
informal relationships help organization members satisfy
their social needs and getting things done.
Authority:
 Authority is power that has been legitimized by the
organization. As organizations grow authority is also
distributed among many managers and employees.

 Authority is the right to act and the power to make decisions,

issue orders, etc.

 The authority flows down the vertical hierarchy.

 The authority has to be adequate for the performance of the

task assigned to the executive.

 The authority need to be accepted by the subordinates.

Without its acceptance, authority becomes dysfunctional.
 Authority can be classified into:

 Line Authority:
 Employee with line authority are called line manager
 Also known as scalar type of structure
 Each manager is given a complete charge of the work
assigned

 Staff Authority:
 Involves giving advice and counsel to line managers to
carry out their operations
 Manager with staff authority is called staff manager
 Used in larger organizations
Power:
 Power is an attribute of an individual’s influence over other
individuals.
 Power can be best utilized for control measure in the
organization so that its resources can be best utilized while
achieving goals.
 Power can be from various sources which we use to influence
others in different situations:

◦ Legitimate Power
◦ Reward Power
◦ Coercion
◦ Expert Power
◦ Referent Power
Responsibility:
 Responsibility is an obligation to the work that is assigned. A
manager is responsible for his or her department. Each staff
is responsible for doing his or her work effectively.
 Everyone in the organization is responsible to his or her job.
The chief executive officer is responsible for overall
organization and its objectives. Similarly middle level and line
managers have responsibility for their departments and units
respectively.
 Top level managers have more authority and responsibility
and lower level managers have less of them with more of
supervisory work.
 It is the process by which managers assign a portion of their
total workload to others.

Reasons for Delegation:

◦ To enable the manager to get more work done by utilizing
the skills and talents of subordinates.
◦ To foster the development of subordinates by having them
participate in decision making and problem solving.

Characteristics of Delegation:
◦ it enables a manager to function independently
◦ The superior does not delegate the total authority
◦ A manager cannot delegate what he or she himself or
herself does not possess
◦ Delegation does not mean giving away authority
◦ The superior, who delegates the authority, cannot escape
responsibility
Problems in Delegation:
 Manager
◦ Reluctant to delegate.
◦ Disorganization prevents planning work in advance.
◦ Subordinate’s success threatens superior’s advancement.
◦ Lack of trust in the subordinate to do well.
◦ Loss of control
◦ Fearing of losing importance
 Subordinate
◦ Reluctant to accept delegation for fear of failure.
◦ Perceives no rewards for accepting additional responsibility.
◦ Prefers to avoid any risk and responsibility.
◦ Lack of motivation
◦ Incompetent subordinates
Tasks for effective delegation:

 Decide which tasks can be delegated

 Decide who should get the assignment
 Provide resources for carrying out the delegated
tasks
 Delegate the assignment
 Be prepared to run interference
 Establish a feedback system
 As organization grows in size and complexity,
decentralization tends to increase.
 The faster the rate of organizational growth, the greater the
need for decentralization.
 When the managers and supervisors at the middle and lower
levels are given considerable autonomy in decision-making,
the organization is considered to be decentralized.
 In a highly decentralized structure, more decisions are made
at lower levels.
 Is important when the business environment is fast-changing
and decisions must be made quickly as well.
 Helps to lighten the load of top management
 The development of generalists rather than specialist is encouraged
 Familiarity with important aspects of special work is readily acquired.
 Organizations having widespread units, managers can obtain full
advantage of local conditions
 Risks involving possible losses of personnel, facilities, equipment, etc.
are spread out.
 To make decentralization effective, the employees must be better
trained and educated
 It is time-consuming and cost affair
 Misutilization of power may create problem
 The team organization
 The virtual organization
 The learning organization
 Boundary less organization
 Meaning and qualities of leadership.
 Understanding Individual differences and psychological
contract.
 Concept and types of groups.
 Leadership Styles: autocratic, democratic, and
participative.
 Concept of managerial ethics.
 Motivation: concept, importance, and techniques.
 Communication: meaning, process, and networks.
 Concept of active listening.
 Types of communication, Barriers to
 effective communication.
 George R. Terry “Leadership is the activity of
influencing people to strive willingly for mutual
objectives.”

 Stephen P. Robbins “Leadership is the ability to

influence a group toward achievement of goals.”

 an art of influencing and inspiring the behavior of

others
 The psychologist contract:
◦ The overall set of expectation held by an individual with respect to what
he or she will contribute to the organization and what the organization will
provide in return.
◦ Contribution: what the individuals provides to the organization, e.g. effort,
ability, loyalty, skills, time, etc.
◦ Inducements: what the organization provides to the individual, e.g. pay,
job security, benefits, career opportunities, status, promotion
opportunities, etc.

 The person-Job Fit:

◦ The extent to which the contributions made by the individual match the
inducements offered by the organization

 The nature of individual difference:

◦ Personal attributes that vary from one person to another
◦ Differences may be physical, psychological or emotional
 Interpersonal influence
 Leaders and followers
 Common goals
 Continuous process
 Situational
 Combination of traits
 Authoritarian style (leader-centered)
 Paternalistic style (leader-centered)
 Participative style (group-centered)
 Laissez-Faire style (individual-centered)
Authoritarian style:
 Called dictatorial or autocratic style
 Do what you are told, and don’t ask questions
 Leader makes all the decisions himself/herself without
consulting to subordinates.
 Leader issues order and instructions to subordinates and
expects total obedience from them.
 There is a system of one way communication and the leader
controls all the information.
 There is the provision of strict supervision and control.
 Leaders give reward and punishment as they like.
 Leader describes each job in details and assigns it to the
subordinates to complete according to his defined standard.
Paternalistic style:
 Leaders are benevolent autocratic
 Work as a father figure, and family head
 Leaders guide, protect and treat subordinates like children
 Leader is little kind showing some flexibility
 there is low trust between leaders and members, upward or
one communication
 Leaders make the decisions
Participative style:
 Called democratic or consultative style
 There are two way communication system and interchanges
of ideas and experiences.
 Leader recognizes human values of subordinates and behaves
with them as members of the organization.
 This leadership provides more scope for use of human
creativity and initiative.
 It provides importance for team spirit and group efforts to
gain common objectives.
 Authority is delegated to subordinates.
 Performances are based on reward and punishment.
Laissez-Faire style:
 Also called Free rein
 Subordinates have complete freedom of choice and can do, as
they like
 The group may lacks any real direction towards achievements
 Subordinates may go away from their responsibilities
 May create conflicts among subordinates
 This style is rarely used in organization
 Leadership traits
 The leadership Behavior Approach
 Situational Approach to leadership

1. Leadership traits:
 Known as Great-man theory of leadership
 Assumed that “Leaders are born; not made”
 Heredity was considered as the main determinant factor
 Leadership qualities were considered as the function of
heredity
 Analyzed the personal, psychological, and physical traits of
strong leaders
 The trait approach assumed that some basic trait existed that
differentiated leaders from non-leaders.
 Researchers thought that leadership traits might include:
◦ Intelligence, assertiveness, above-height, good vocabulary, attractiveness,
self-confidence, and others

Limitation:
◦ Their findings were inconsistent and inconclusive
◦ This theory could not answer many unexplained variables
associated with leadership
◦ The trait approach was all but neglected several decades ago
2. The leadership behavior approach:
The assumptions of the theorists was that:
 The behavior of effective leaders would be different from the
behaviors of less effective leaders
 The behavior of effective leaders would be the same across all
situations
 These studies included:
◦ The Michigan Studies
◦ The Ohio State studies
◦ The leadership grid

a) Michigan Studies
◦ Researchers at the University of Michigan, led by Rensis
Likert
◦ Research identified two basic forms of leader behavior:
 Job-centered leader behavior: pay close attention to
subordinates work, explain work procedures, and are keenly
interested in performance
 Employee-centered leader behavior: are interested in developing a
cohesive work group and ensure that employees are satisfied with
their job. Their primary concern is the welfare of subordinates.
 Assumed employee centered leader behavior tends to be more
effective.

b. Ohio State Studies:

 a group of researchers at Ohio State University also began
studying leadership
 Two basic leader behaviors or styles:
◦ Initiating-structure behavior:
The behavior of leaders who define the leader-subordinate role so
that everyone knows what is expected, establish formal lines of
communication, and determine how tasks will be performed.

◦ Consideration behavior:
The behavior of leaders who show concern for subordinates and
attempt to establish a warm, friendly, and supportive climate

Both behavior tends to be more effective.

c. Managerial grid (leadership grid):
 Concern for production: the horizontal axis; similar to job-
centered and initiating-structure behavior
 Concern for people: the vertical axis; similar to employee
centered and consideration behaviors
 Each dimension is expressed on a scale ranging from 1,
which stands for minimum concern, to 9, which stands for
maximum concern
 They identified five different styles of leadership:
◦ The 9,1 style: shows primary concern for production; also called task
mgmt or authoritarian mgmt

◦ The 1,9 style: primary concern to people; known as country-club type of

leadership

◦ The 1,1 style: minimum concern for either people or production; known as
impoverished leadership or laissez-faire mgmt

◦ The 5,5 style: leader has moderate concern for both production and
people; known as middle-of-the-road or compromising leadership
 The 9,9 style: leader shows high concern for both people and production;
also called team-based style or democratic mgmt; most effective leadership
style
 Leadership grid is widely used today as a method to examine managerial or
leadership style

3. Situational Approach:
◦ Situational models assume that appropriate leader varies from
one situation to another
◦ There is no one best way to be a leader
◦ Effectiveness of any particular leader is dependent on the
situation
◦ Fiedler’s contingency model:
 A theory of leadership that suggests that the appropriate style of
leadership varies with situational favorableness
 Known as LPC (Least preferred coworker) measure
 The measuring scale that asks leaders to describe the person with whom
he or she is able to work least well
 Fiedler developed a questionnaire to measure the concept
 Three situational criteria: leader-member relations, task
structure, and position power
◦ Leader-member relations: whether or not the subordinates trust or like
their leader
◦ Task structure: the extent to which the group’s tasks, goals, and
performance are clearly defined
◦ Position power: the extent to which the leader uses controls, rewards, and
punishments for subordinates

 Leadership style: whether a person is task oriented or

relations oriented
◦ task-oriented: those who assign specific work to subordinates, closely
supervise them, and reward them only with financial incentives
◦ Relations-oriented: those who build teamwork through supportive,
considerate, and social behavior
  The most favorable situation: leader-member relations are
good; task structure and power position are high
 The least favorable situation: leader-member relations are
poor; task structure and position power are low

Contingency Factors Situations

Leader-member relations Good Bad

Task structure High Low High Low

Position power Strong Weak Strong Weak Strong Weak Strong Weak

Favorableness
Most favorable Moderately favorable Most unfavorable
of Situation

Appropriate
Task-oriented Relationship-oriented Task-oriented
Leader Behavior
Path-Goal Theory:
 A theory of leadership suggesting that the primary functions
of a leader are to make valued or desired rewards available in
the workplace and to clarify for the subordinate the kinds of
behavior that will lead to those rewards

Subordinates’ Leader behaviors Environmental

personal • Directive characteristics
characteristics • Supportive • Task structure
• Perceived ability • Participative • Work group
• Locus of control • Achievement-
oriented

Subordinates’ motivation to perform

 Leader Behavior:
 Directive, supportive, participative, achievement oriented

 Situational factors:
◦ Personal characteristics of subordinates and environmental characteristics
of the workplace
 Motivation means to make an employee act in desired manner
or in the interest of the organization.
 Motivation works best when individual needs are compatible
with organizational goals.

Theories of motivation:

1. The need Hierarchy theory:

◦ Physiology
◦ Security
◦ Social
◦ Esteem
◦ Self-actualization
2. Motivation-Hygiene Theory:
 Developed by Fredrick Herzberg in the early 1960

 Known as dual factor theory or two-factor theory

 Emphasized two sets of factors:

◦ Hygiene factors
◦ Motivating factors

 Hygiene factor:
◦ Called Maintenance factors which maintains employees’ satisfaction
◦ Absence causes dissatisfaction
◦ Include: salary, job security, work conditions, status, interpersonal
relations, etc.

 Motivating factors:
◦ Called motivators or satisfiers which satisfy the employee’s needs for self-
actualization
◦ Include: achievement, recognition, possibility of personal growth,
responsibility
 Motivating factors are related to job satisfaction, whereas the
hygiene factors are related to job dissatisfaction

 The motivating factors are not provided, employees will not be

motivated, but the absence of motivating factors will not necessarily
cause job dissatisfaction.

 The absence of hygiene factors may cause employee dissatisfaction

but the presence of such factors does not increase employee
satisfaction

 The manager should adopt a two-staged motivational strategy

 The first stage, they must make sure that the hygiene factors are not
lacking and second managers should ensure that the employees
have opportunity for achievement, recognition, etc.

 This can create a good climate for motivation.

1. Quality of work life:
• Indicates the quality of relationships between employees and the
total work environment
• Learning and developing environment
• Make available to the employees interesting, challenging and
meaningful work as a source of personal satisfaction
• Make actively participate in decision-making, contribute to
organizational goals, and obtain recognition and rewards.
• Adequate and fair competition

2. Self-managed work teams:

◦ Self management is the best management
◦ Promotes creativity, motivation and productivity
◦ Employees are trained
 Rickey W. Griffin “Communication is the process of
transmitting information from one person to another
person.”
 Effective communication is the process of sending a
message in such a way that the message received is
as close in meaning as possible to the message
intended.
 Information Sharing
 Problem Solving
 Decision Making
 Strategy Implementation
 Team Management
 Organization change and development
 Feedback
 Sender (Source): who has an idea
 Encoding: sender choose certain words or non-verbal
methods to translate the idea into a message, this activity is
called encoding.
 Message Channel: electronic, printed word, graphic, media of
sound
 Receiver: any person who notices and attaches some meaning
to a message
 Decoding: message reaches to receiver, is no guarantee that
it will be understood as the sender intended to be. Attaching
meaning to the words or symbols is decoding, interpretation
by receiver
 Feedback: receiver reacts or responds to the communication
 Formal Communication
 Informal Communication

On the basis of media:

 Interpersonal (verbal) Communication
 Non-verbal Communication
Formal Communication:

 Official Channel of Communication

 It flow through established Authority
 Controlled and regulated by management
 The management decide which to share or not
 Example are: official letters, memos, notices,
reports, staff meeting, etc,
 Form of Formal Communication are :
◦ Upward , Downward, Horizontal, Diagonal
Informal Communication:
 Unofficial Communication
 Occurs Outside the formal channel
 Gossip, Complain, Whisper,
 Not officially approved and sanctioned
 Communication is done to maintain social
relationship

Modes of Informal Communication:

Grapevine: an informal communication network
among people in an organization
◦ Single-stand chain
◦ Gossip chain
◦ Probability chain
◦ Cluster chain
Interpersonal Communication:
 Oral Communication:
◦ Face to face conversion, group discussions, telephone calls,
and other circumstances in which the spoken word is used
to transmit meaning

 Written Communication:
◦ Memos, letters, reports, notes, and other circumstances in
which the written word is used to transmit meaning
◦ better for complex and difficult subjects, facts and
opinions, better for keeping records of messages
exchanged, provide opportunity to refer back, can be
revised before transmitting, immediate feedback in not
available, never know if the message is ever read, time
consuming, reader are not helped by non-verbal clues
Non-verbal communication:
◦ Body language: gestures, postures, the nodding of our head,
blinking of our eyes, waving of our hands, shrugging of our
shoulders, etc.
◦ Paralanguage: pitch variation, speaking speed, pause, volume
variation, word stress

◦ Communication that is transmitted without words.

 Sounds with specific meanings or warnings
 Images that control or encourage behaviors
 Situational behaviors that convey meanings
 Clothing and physical surroundings that imply status
◦ Body language: gestures, facial expressions, and
other body movements that convey meaning.
◦ Verbal intonation: emphasis that a speaker gives to
certain words or phrases that conveys meaning.
 Organizational barriers:
◦ These barriers are formed within the organization through
organizational system, rules, policy & beliefs.
◦ The organizational barriers involve organizational policies,
organizational rules & regulations, lengthy scalar chain, one
way communication system & lack of confidence in
subordinates.

 Physical barriers:
◦ Internal structure the organization & layout of office
machine & equipments also create barriers in the
transformation of information.
◦ Some common physical barriers involve physical distance,
hierarchy of structure, office design & noise.
 Psychological barriers.
◦ Psychological barriers are generated due to human perception,
lack of skill & negative thinking of the top level of managers.
◦ Some common psychological barriers involve distrust of
communicator, superiority complex, individual perception,
premature evaluation & no attention.
 Semantic barriers:
◦ Semantic barriers are created due to the use of difficult &
intensive language by the sender.
◦ Some common scientific barriers involve harsh language,
vague language, misleading translation & technical language.
 Technological barriers
◦ These barriers are formed due to defect in technology used &
overload in information.
◦ Some common technological barriers involve mechanical
barriers, loss of transmission, information overload &
insufficient time allowed.
 Group:
◦ Two or more interacting and interdependent individuals
who come together to achieve specific goals.
◦ Formal groups
 Work groups defined by the organization’s structure
that have designated work assignments and tasks.
 Appropriate behaviors are defined by and directed toward
organizational goals.
◦ Informal groups
 Groups that are independently formed to meet the
social needs of their members.
 Forming:
◦ knowing each other, try to find out each other attitudes, backgrounds, and
personalities
 Storming:
◦ critical phase, conflicts and differences of opinion emerge among
members
◦ Members debate on the purpose of the group, group norms, and group
goals
◦ Conflict over leadership issues
 Norming:
◦ Vital stage of group formation
◦ The members sit together and try to develop group system, rules, norms
and standards of their behavior
◦ Norms, tasks and roles are assigned to individual members
◦ In this phase, group members agree on their shared goals and group
norms
 Performing:
◦ Group becomes functional, members begins to perform
their assigned tasks
◦ This is the last stage for permanent groups
 Adjourning:
◦ For temporary groups, this stage becomes relevant
◦ Group prepares for its termination

Importance of Groups:
◦ provide satisfaction to members
◦ problem solvers
◦ better decisions than individuals
◦ good for implementing decisions
◦ effectively control their members
◦ contribute to the development of members’ personality
 Problem solving teams:
◦ Formed for the specific purpose of solving problems
◦ Do not have the authority to implement any new ideas
 Self managed work teams:
◦ Fully autonomous and they have authority to implement
new ideas and solutions.
◦ They have full responsibility for the outcomes
 Cross functional teams:
◦ Employees from different departments are grouped
together to perform a certain task
 Virtual teams:
◦ The members of these teams make contacts with each
other’s through online like internet, intranet or emails.
◦ Don’t have face to face contact but can work together
 A conflict is a process that begins when one party perceives
that another party has negatively affected its interests.
 A conflict is a disagreement among two or more individuals,
groups or organizations.

Nature of conflicts:
 Conflict is a disagreement between two or more individuals,
groups, or organizations
 Conflict can be mild or very strong
 It can be for shorter period or can continue for longer period
 Conflict is not always harmful, certain kind of conflict, if
managed well, can be helpful for effective performance
 Managers need to manage conflict before it becomes
dysfunctional
Causes of Conflict:
 Limited resources
 Communication problems
 Lack of job clarity
 Personality clashes
 Goal differences
 Complex and dynamic environment
 Status and role inconsistencies

Types of Conflict:
 Intrapersonal conflict (conflict within individual)
 Interpersonal conflict (conflict between individual)
 Intra team conflict (within a team)
 Inter team conflict (between two or more teams)
Managing Conflicts in organization:
 Stimulating conflicts:
◦ Hire outsiders to shake things up, change establish procedures

 Controlling conflicts:
◦ Expand resource base, enhance coordination of interdependence, set
subordinate goals and match personalities and work habits of employee

 Resolving and eliminating conflict:

◦ Avoid conflict, convince conflicting parties to compromise, bring
conflicting parties together to confront and negotiate conflict

 Conflict management strategy:

◦ Win-win strategy, win-lose strategy and lose-lose strategy
 Meaning, purpose, Process and types of controls.
Essentials of effective control systems.
 Control tools and techniques.
 Quality: Concept and importance.
 Total Quality Management: concept, components,
principles, tools and techniques.
 Emerging issues in quality management.
Production and operation management, supply
chain management, Kaizen, six sigma, The
Japanese 5S practice, Technology management,
Management information system and IT.
 Controlling is determining what is being accomplished, that is
evaluating the performance and if necessary, applying
corrective measures so that performance takes place
according to plans
 A process to measure actual performance achieved with that
of planned performance and take corrective step if any
deviation is there between actual and planned performance.
 Control is the regulation of organizational activities so that
some targeted element of performance remains within
acceptable limits.
 Management Function
 Pervasive Function
 Continuous Process
 Dynamic Process
 Forward Looking
 Corrective action
 Interrelated with planning
 Pre-Control System
 Concurrent Control System
 Post Control System
 1 2 3 4
Compare Determine need
Establish Measure
performance for corrective
standards performance against standards action

Maintain the Correct the Change

status quo deviation standards

◦ Steps in the Control Process
◦ Establish Standards
 Control standard—a target against which subsequent performance will
be compared.
 Control standards should be expressed in measurable terms.
 Control standards should be consistent with organizational goals.
 Control standards should be identifiable indicators of performance.
◦ Measure Performance
 Performance measurement is a constant, ongoing process.
 Performance measures must be valid indicators (e.g., sales, costs, units
produced) of performance.
◦ Compare Performance Against Standards
 Define what is a permissible deviation from the performance standard.
 Utilize the appropriate timetable for measurement.
◦ Determine the Need for Corrective Action
 Maintain the status quo (do nothing).
 Correct the deviation to bring operations into compliance with the
standard.
 Change the standard if it was set too high or too low.
Characteristics of Effective Control:
◦ Integration with Planning
 The more explicitly and precisely control is linked to
planning, the more effective the control system.
◦ Flexibility
 The control system must be flexible enough to
accommodate change.
◦ Accuracy
 Inaccurate information results in bad decision making and
inappropriate managerial actions.
◦ Timeliness
 A control system should provide information as often as
necessary.
◦ Objectivity
 A control system must be free from bias and distortion.
Resistance to Control
◦ Over control
 Trying to control too many details becomes problematic
when control affects employee behavior and employees
perceive control attempts as unreasonable.
◦ Inappropriate Focus
 The control system may be too narrow or it may focus too
much on quantifiable variables and leave no room for
analysis or interpretation.
◦ Rewards for Inefficiency
 Rewarding operational efficiency can lead employees to
behave in ways that are not in the best interests of the
organization.
◦ Too much accountability
 Efficient controls are resisted by poorly performing
employees.
Tools and Technique of Control
 Non-financial control
1. Marketing Control
 Helps monitor progress toward goals for customer
satisfaction with product and services, price and
delivery.
 Examples of control used to evaluate an
organizations marketing functions
 Marketing Research: gathers data to assess
customer needs
 Test Marketing: a small scale product
marketing to assess customer acceptance
 Marketing Statstics:measure marketing
performance by compiling data and analyzing
results
Tools and Technique of Control
2. Human Resource Control
◦ Regulates the quality of newly hired staff, as well
as monitor current employees development and
daily performance.
◦ Common control types include performance
appraisals, disciplinary progress, training and
development assessments and productivity etc.
3. Computer and Information Control
◦ Collect and store information for control purpose
◦ Assess the organization progress and performance
Tools and Technique of Control
4. Quality Control
 System of routine examination of a product, service
or process for certain minimum levels of quality
 Identify service and product that does not meet the
minimum standard of quality
 If a problem is identified through investigation is
done to identify the cause.
Tools and Technique of Control
 Financial control
1. Budgetary Control
 Carefully prepared formal statement of future
expenditures and revenues is called a budget.
 Mostly the budget period in one year in length.

 The budget period is divided into monthly and

quarterly budget so that managers are able to
evaluate actual performance and take corrective
action promptly.
Types of Budget
 Operating Budget

 Financial Budget
Tools and Technique of Control
 Approaches to Budgeting
◦ Zero Base Budgeting
◦ Programme Budgeting
◦ Performance Budgeting
◦ Compromise Budgeting
Tools and Technique of Control
2. Financial Statement
Balance sheet
Profit and loss Statement
Fund flows and Cash Flows
Financial Ratios
3. Financial Audits
Evaluation of organizations books of account and
financial statements
Internal Audit
External Audit
Management Audit
 Data are raw figures and facts reflecting a single aspect of
reality
 Information is the meaningful presentation of data through
analysis and interpretation
 Some information are used immediately, some are stored for
late use and some information are discarded when
unnecessary
 This process of collecting data in raw form and converting it
into meaningful information and disseminating to concerned
departments or managers is called information system
 Managers need information for each and every decision they
make from purchasing the raw materials, quality control of
the products and services, managing human activities to
major decisions
 Information is needed for both operational control to
managerial and strategic control
 Gathers data, organizes and summarizes it in a form valuable
to managers, and provides those managers the information
they need to make decisions
 MIS provides required information to each level of
management at the right time and in the right form
 Supports an organization’s managers by providing daily
reports, schedules, plans, and budgets
 MIS relies on an integrated database
 MIS components:
◦ Input
◦ analysis and processing
◦ storage and retrieval
◦ output
◦ information flow
 DSS is more advanced form of MIS

 An interactive system that locates and presents information

needed to support the decision-making process

 It uses complex techniques like mathematical formula,

statistical tools and models to provide managers with
accurate analysis based on which management can make
important decisions

 DSS is a system that automatically searches for, manipulates,

and summarizes information needed by managers to make
specific decision

 Various computer software and tools can be used in this

process
 TQM is continuous, customer-oriented, employee driven
improvement

 A strategic commitment by top management to change its

whole approach to business in order to make quality a
guiding factor in everything it does

 Major ingredients or elements of TQM are:

◦ Strategic Commitment,
 Employee involvement,
 Materials,
 Technology
 Methods
 Strategic commitment

Employee
Materials Technology Methods
involvement

Quality improvements
 TQM Tools and Techniques:
◦ Value-added analysis: The comprehensive evaluation of all work
activities, materials flows, and paperwork to determine the value
that they add for customers.

◦ Benchmarking—the process of learning how and what other firms

do in an exceptionally high-quality manner.

◦ Outsourcing—subcontracting operations/services to those who

can do them cheaper and/or better.

◦ Speed—the time needed by the organization to get something

accomplished.

◦ ISO 9000—a set of quality standards created by the International

Organization for Standardization by which firms can be certified.

◦ Statistical Quality Control (SQC)—a set of statistical techniques

that can be used to monitor quality; includes acceptance sampling
and in-process sampling.
 People:
◦ Quality of people determines quality of product or services
◦ Organization should improve the capability of their employee

 Materials:
◦ Quality of raw materials affects the quality of goods produced

 Equipment
◦ Equipment used in the production process determines the
efficiency and cost of production
◦ Poor equipment leads to poor processing, poor quality, higher
rejection rates, higher wastages, frequent breakdowns, higher
repair and maintenance costs, and so on.

 Innovation and Design

◦ Innovation is the outcomes of R&D
◦ Helps to introduce new or different products according to the
need of customers at a reasonable cost and competitive quality
 Control systems and standards:
◦ Quality control system and standard should be appropriately
designed and implemented
◦ Defects should be detected as early as possible and should take
corrective actions

 Work methods and technology:

◦ Pay attention to methods improvement and technology up
gradation to ensure competitive quality of goods and services
◦ Quality is not possible without continuous improvement in
methods and technology
 W. Edwards Deming is called the father of the new industrial age

 Deming studies mathematics and worked for the US Department

of Agriculture

 In Japan, Deming got the opportunity to meet and talk with top
Japanese executives

 In his several interactions were convinced with his ideas and

applied them which transformed the Japanese industries with
huge performance

 In 1951, Japan established the Deming Prize for accomplishment

in quality control
Deming’s Principle of Quality Management:

 To increase quality, organizations need to develop strategic plans

 Managers should realize that mistakes, defects, and poor-quality

materials should not be acceptable

 First-line managers should be allowed to spend more time working

with employees

 Management should create an environment in which employees will

not be fair to report problems or recommend improvements

 Outputs goals and targets should include not only numbers or

quotas but also some notion of quality

 Management should assume the responsibilities to train employees

in new skills

 Achieving better quality requires managers to develop

organizational values and norms centered on improving quality
Deming’s Quality Management Techniques:

 Constant purpose
 New philosophy
 Give up quality by inspection
 Seek continuous improvement
 Train everyone
 Avoid the constant search for lowest-cost suppliers
 Provide real leadership
 Drive fear out of the workplace
 Promote teamwork
 Avoid slogan and targets
 Get rid of numerical quotas
 Remove barriers that stifle pride in workmanship
 Education and self-improvement are key
 The transformation is everyone’s job
 Deming’s 14 Points on Quality Management, a core
concept on implementing total quality management,
is a set of management practices to help companies
increase their quality and productivity.


 Deming’s 14 Points are as follows:



 1.Create constancy of purpose for improving products

and services.
 2.Adopt the new philosophy.
 3.Cease dependence on inspection to achieve quality.
 4.End the practice of awarding business on price
alone; instead, minimize total cost by working with
a single supplier.
 5.Improve constantly and forever every process for
planning, production and service.
 6.Institute training on the job.
 7.Adopt and institute leadership.
 8.Drive out fear.
 9.Break down barriers between staff areas.
 10.Eliminate slogans, exhortations and targets for
the workforce.
 11.Eliminate numerical quotas for the
workforce and numerical goals for
management.
 12.Remove barriers that rob people of pride
of workmanship, and eliminate the annual
rating or merit system.
 13.Institute a vigorous program of
education and self-improvement for
everyone.
 14.Put everybody in the company to work
accomplishing the transformation.
 These total quality management concepts can be
put into place by any organization to more
effectively implement total quality management. As
a total quality management philosophy, W. Edwards
Deming’s work is foundational to TQM and its
 Operation Management & Production Management :
 Meaning : Operations Management concern with the
conversion of inputs into outputs, using physical
resources so as to provide the desired utilities to the
customer while meeting the other organizational
objectives of effectiveness, efficiency and
adoptability.
 Production Management refers with conversion of
inputs into outputs. All organization produce goods
and services according to the demand of customer.
 The objectives of Operation management &
Production Management are “to produce goods and
services of the right quality, in the right quantities,
according to the time schedule and a minimum cost”.
 Operation Management & Production Management
functions :
1. Location of facilities.
2. Plant layouts and Material Handling.
3. Product Design.
4. Process Design.
5. Production and Planning Control.
6. Quality Control.
7. Materials Management.
8. Maintenance Management.
9. Commitment to quality
10. Focus on the customer
11. Measurement of quality
12. Goal setting for quality
 Supply Chain definition:
 The movement of materials as they flow
from their source to the end customer.
 Supply Chain includes purchasing,
manufacturing, warehousing, transportation,
customer service, demand planning , supply
planning and Supply Chain management.
 It is made up of the people, activities,
information and resources involved in
moving a product from its supplier to
customer.
 The Japanese word kaizen simply means "change for better",
either "continuous" or "philosophy" in Japanese dictionaries or
in everyday use. The word refers to any improvement, one-
time or continuous, large or small. However, given the
common practice in Japan of labeling industrial or business
improvement techniques with the word "kaizen", particularly
the practices spearheaded by Toyota, the word "kaizen" is
typically applied to measures for
implementing continuous improvement, especially those with a
"Japanese philosophy.
 Two kaizen approaches have been distinguished:
 flow kaizen
 process kaizen
 The former is oriented towards the flow of materials and
information, and is often identified with the reorganization of
an entire production area, even a company. The latter means
the improvement of individual work stands.
 Kaizen is the practice of continuous improvement. Kaizen was
originally introduced to the West by Masaaki Imai in his
bookKaizen: The Key to Japan’s Competitive Success in 1986.
Today Kaizen is recognized worldwide as an important pillar
of an organization’s long-term competitive strategy. Kaizen
is continuous improvement that is based on certain guiding
principles:

 Good processes bring good resultsGo see for yourself to

grasp the current situationSpeak with data, manage by
factsTake action to contain and correct root causes of
problemsWork as a teamKaizen is everybody’s businessAnd
much more!
 One of the most notable features of kaizen is
that big results come from many small changes
accumulated over time. However this has been
misunderstood to mean that kaizen equals small
changes. In fact, kaizen means everyone involved
in making improvements. While the majority of
changes may be small, the greatest impact may be
kaizens that are led by senior management as
transformational projects, or by cross-functional
teams as kaizen events.
 There are five 5S phases:
 They can be translated from the Japanese as "sort", "set
in order", "shine", "standardize", and "sustain“
 Sort (Seiri) :
 Make work easier by eliminating obstacles.
 Reduce chances of being disturbed with unnecessary
items.
 Evaluate necessary items with regard to cost or other
factors.
 Remove all parts or tools that are not in use.
 Segregate unwanted material from the workplace.
 Need fully skilled supervisor for checking on a regular
basis.
 Waste removal.
 Set In Order (Seiton)
 Arrange all necessary items so that they can be
easily selected for use.
 Make it easy to find and pick up necessary items.
 Ensure first-in-first-out FIFO basis.
 Make workflow smooth and easy.
 All of the above work should be done on a regular
basis.
 Maintain safety.
 Shine (Seiso)
 Clean your workplace on daily basis completely or
set cleaning frequency
 Use cleaning as inspection.
 Prevent machinery and equipment decline.
 Keep workplace safe and easy to work.
 Keep workplace clean and pleasing to work in.
 Standardize (Seiketsu)
 Standardize the best practices in the work area.
 Maintain high standards in workplace organization
at all times.
 Maintain orderliness. Maintain everything in order
and according to its standard.
 Everything in its right place.
 Every process has a standard
 Sustain (Shitsuke)
 Not harmful to anyone.
 Perform regular audits.
 Training and discipline.
 Training is goal-oriented process. Its resulting
feedback is necessary monthly.
 Self discipline
 Six Sigma
 The statistical representation of Six Sigma
describes quantitatively how a process is
performing.
 To achieve Six Sigma, a process must not
produce more than 3.4 defects per million
opportunities.
 The fundamental objective of the Six
Sigma methodology is the implementation
of a measurement-based strategy that
focuses on process improvement and
variation reduction through the application
of Six Sigma improvement projects.

43
 7
chapter
 Nature, forces, paradigm shifts and areas
(structure, technology, business process and
behaviors) of organizational change.
 Resistance to change. Overcoming resistance to
change.
 Concept of Organizational Development, OD
intervention.

 Globalization - concept, nature and forms

 Methods of globalization
 Changing international management scenario
 Multinational companies - meaning and types
 effects and benefits
 Any substantial modification to some part of the
organization.

 Organizational change may be defined as “the

adoption of a new idea or behaviour by an
organization.”

 It can be also defined as “organizational change is

any alteration of people, structure, or technology.”

 It is a process of moving from a present stage

through a traditional stage to a future stage.
 External Forces (globalization, competition, workforce
diversity, technological change, & managing ethical
behaviour)
A. General Environment (Economic, technological, Socio-
cultural, Political-Legal, & International)

B. Task Environment (Competitors, Customers, Suppliers,

Strategic Partners, & Regulators)

 Internal Forces (Owners, Board of Directors, Employees,

Physical Work Environment, & The Organization’s Culture)
 Organization Structure and Design (job design,
departmentalization, reporting relationships,
authority distribution etc.)
 Technology and Operations (IT, equipment, work
processes, work sequence etc.)
 People, Attitudes, and Behavior (skills, perceptions,
expectations, attitudes, values)
Reasons:

 Uncertainty

 Threatened Self-Interests

 Different Perceptions

 Feelings of Loss

 Misunderstanding and lack of trust

 Participation

 Education and Communication

 Facilitation

 Selecting those people who accept change

 Coercion
 ODis a planned process of change
in an organization’s culture
through the utilization of
behavioral science technology,
research, and theory.

Cummings & Worley 7e. (c) 2001

South-Western College Publishing 1-8
OD refers to a long-range effort to
improve an organization’s problem-
solving capabilities and its ability to
cope with changes in its external
environment with the help of
external or internal behavioral-
scientist consultants.

Cummings & Worley 7e. (c) 2001

South-Western College Publishing 1-9
OD is an effort (1) planned, (2)
organization-wide, and (3)
managed from the top, to (4)
increase organization effectiveness
and health through (5) planned
interventions in the organization’s
“processes,” using behavioral
science knowledge.
Cummings & Worley 7e. (c) 2001 1-
South-Western College Publishing 10
a systemwide application of
behavioral science knowledge to
the planned development,
improvement, and reinforcement of
the strategies, structures, and
processes that lead to organization
effectiveness.

Cummings & Worley 7e. (c) 2001 1-

South-Western College Publishing 11
 Objectives of OD
• Effective Performance
• Develop Efficiency
• Emphasis on team work
• Conflict resolution
• Adaptation to environment

Cummings & Worley, 7e (c) 2001 2-

South-Western College Publishing 12
 Intervention is any event , directed toward
improving organizational effectiveness, that
disrupts an organization’s normal way of
operating
 It is a techniques that OD practitioners use to
bring about change.
 For organizational development it is essential to
perform some activities at individual level,
group level and organizational level.

Cummings & Worley, 7e (c) 2001 3-

South-Western College Publishing 13
 Individual Level activities
 Counseling and Coaching
 Sensitivity Training (change in behavior of group
member through group interaction)
 Survey feedback
 Group Level Activities
 Formulation of team
 Process Consultation
 Intergroup development

Cummings & Worley, 7e (c) 2001 3-

South-Western College Publishing 14
 Organization Level activities
 Organization restructuring
 Technological Change
 Goal Setting
 Quality of work life program

Cummings & Worley, 7e (c) 2001 3-

South-Western College Publishing 15
 Globalization is a free movement of goods, services, people,
capital, technology and information from one country to
another country on international level

 Today many organizations are moving into many countries

for expansion of their markets or several other opportunities
like investment, outsourcing, cheap labor, etc.

 E.g.: Philips, Coca Cola, Pepsi, Nestle, Toyota, etc.

 Global boosting among the countries through various

economic and regional cooperation like WTO, SAARC (South
Asian Association for Regional Cooperation), etc.

 Globalization is the integration of political, economic and

cultural system across the globe
 Integration:
◦ Integrates the economy, political and cultural systems across the
world
 Open market economy:
◦ Emphasizes on open market economy. It encourages to the liberal
and private economy.
 Free movement of factors of production:
◦ Facilitates free movement of factors of production consisting of
capital, manpower, materials, management & technology at the
international level
 Modern communication and transportation:
◦ Globalization needs the use of modern means of communication
and transportation system
 International operation:
◦ Business activities are performed at the international level in
which goods and services are moved in any part of the world
 Economic Globalization:
◦ Integration of national economy into global economy due to deregulation,
liberalization, free movement of materials, technology and capital from
country to country
◦ It involves international trade, foreign direct investment, capital flow, and
movement of labor, etc.
◦ The formation of WTO and other regional groups and multinational
companies are the basis of economic globalization

 Cultural Globalization:
◦ Culture is the set of norms, value, beliefs, traditions and social system of
people
◦ The exchange of the cultural values among the people of different parts of
the world helps them to understand each other and develops a feeling of
mutual respect.
◦ Due to movement of people, television programs, flow of varieties goods,
people are familiar with foreign culture and social values.
◦ Helps to reduce cultural differences.
 Political Globalization:
◦ The process of reconciling national institutions, policies, laws and
regulations into the multilateral framework provided by international
treaties and regulations to exercise globally
◦ Exchanges of views and experiences between nations regarding the
establishment of good governance system, legal system, human rights,
free media, property rights, decentralized pattern of governance, relatively
free access to state information, and so on.

 Environmental Globalization:
◦ Environment pollution, global warming, increasing the volume of the
depletion of ozone layer are common agendas of all countries in the
world.
◦ Ecological problems like: floods, water and air pollution, deforestation,
soil erosion, and acid rain are cross boarder problems and only country
can’t solve these problems alone.
◦ Countries are trying to encourage understanding these global agendas and
making a joint action plan to protect the environment
 Exporting:
◦ a direct sale by a manufacturer to an overseas customer
◦ Export is preferable when the cost of production in the home
country is substantially lower than producing goods in foreign
markets

 Licensing and Franchising:

◦ A business firm can contractually assign the rights to certain
design, intellectual property to a foreign company in return for
royalty
◦ In many countries, law regulates such fees or royalty.
◦ Franchising is a form of licensing in which a franchiser grants
another independent entity (the franchisee) the right to do
business in a prescribed manner.
◦ E.g.: parent company’s product, to use its name, to adopt its
methods, or to copy its symbols, trademarks, etc.
 Fully owned manufacturing facilities:
◦ Bigger organization establish their own factories abroad
◦ Corporation has full control over production and quality
◦ There may be some problems while operating in a foreign country
◦ Some constraints may appear like: lack of skilled manpower, raw material
supply, etc.

 Joint Venture:
◦ A partnership in which the domestic and the foreign firm negotiate tie-ups
involving one or more factors such as equity, transfer of technology,
investment, production and marketing
◦ In some cases, there are more than two parties involved.
◦ There are laws regulating joint ventures
 Merger and Acquisitions:
◦ Combination of two or more than two companies is called merger
◦ Acquisition is take over of weak organization or the way to buy smaller
organization by big organization
 Strategic Alliances:
◦ Linkages between firms to jointly pursue a common goal, such as
collaborative agreements, strategic alliances, and global strategic
partnerships
 Globalized Production:
◦ The production activities are now moving out of the developed countries
◦ The manufacturer activities are scattered around the world and becoming
a global affairs

 Global Outsourcing:
◦ Outsourcing is the process of subcontracting raw materials and suppliers
to another organization that helps to reduce cost and improve quality.
◦ It is the activities of doing contract to outsiders’ organization regarding
production task

 Shift from Manufacturing to Service Industries:

◦ Diverted from manufacturing to service sectors in the recent years
◦ Service sector includes hotel, transportation, telecommunication,
computer software, education, hospitals, and so on.
 Global Corporations:
◦ Increasing the number of global corporations around the world
◦ Many multinational companies produce and sell their product under the
same brand using the same technology
◦ To create millions of new customers through the supply of qualitative
goods and services at a reasonable price

 Global competition:
◦ Competition has increased
◦ The world has been considered as a small global village due to
development of informational technology
 Companies originated in one country but operate its business
unit more than one country are called multinational
companies.
 Big in size, operates their activities more than one countries,
centralize ownership and control and local currency are used
to trade in local country.
 Controlling power of MNC retains in the home country.
 Companies go multinational to search new market, to reduce
the cost, generate more income and enjoy competitive
advantages
 Some example of MNC are IBM corporation, General Electric
company, Ford Motor corporation, Mercedes Benz car
company, etc.
 The major multinational companies working in Nepal are
Uniliver limited, Colgate-Palmolive, Bottlers Nepal, Pepsi cola
Nepal, Dabur Nepal, so on.
 Productive enterprises:
◦ Large scale productive enterprises that produce goods and services by
using advanced technology

 Mass production and distribution:

◦ Massive production capacity and their distribution network is also large

 Efficient management:
◦ Success of multinational companies is efficient management

 Advanced technology:
◦ Use advanced and modern technology that minimize the production cost

 Large scale organization:

◦ Every aspect of the business is large, i.e. capital, technology, organization,
production, distribution, and so on.
Multinational companies can be classified into three categories
on the basis of their nature of business

 Raw material Seekers:

◦ For searching best quality raw materials in cheapest price

 Market Seekers:
◦ To produce and sell their product in foreign market
◦ Main objective is to expand their business at international level

 Cost Minimizers:
◦ Objective of reducing cost of the goods and services through installing
plants in the countries where labor and energy cost is low
◦ E.g. Sony, Honda, Suzuki have established their production plants in
China, India, Malaysia, etc.
 Promotes the investment climate
 Technology transfer
 Export increase of host country, import decrease causing
improvement in balance of payment
 MNCs help cost of factor of production become equal all over
the world
 MNCs with efficient research and development system make
contribution to innovation and investments
 Presence of MNCs is a support for domestic industries,
suppliers and other business activities
 Greater availability of products for local consumers
 MNCs may increase dependency of developing countries
 MNCs are also criticized for sending a huge amount of profits
to their own home countries.
 They are also criticized for taking away capital and job
opportunities from home country to host country
 may destroy competitive environment in the country